New Old Trafford boss Erik ten Hag wants to raid his old club for the Argentine centre-back.
Arsenal are also keen on Martinez, 24, who is valued at £43million.
But Stam believes the South American would be a huge hit for United - despite his modest 5ft 9ins stature.
Dutch icon Stam won the Champions League and three Premier League titles before ending his three-year Old Trafford stay in 2001.
He then went on to finish off his playing days at Ajax, and later coached their junior sides.
The ex-Reading and Feyenoord boss knows the defender well having watched him star in the Eredivisie.
And he is adamant that the player has all the tools to succeed at the Red Devils.
Stam, 49, said: “It is difficult to say whether Martinez is worth £43m, but those sorts of fees have become normal - especially in England.
'I have become a big fan of his. I find him a great lad, with a good temperament and a winning mentality. Players like that are a dream for managers to work with.
'In the past, defenders in England could never be tall enough. But these days, most clubs and managers want to play the ball out from the back.
'That doesn't mean that Lisandro won't have to do his share of defending. He can count on it.
'But he is very skillful, and creative with his passing. The more of these types of player Ten Hag has in his squad, the more his team can keep possession and the less they get hit on the counter-attack.”
Stam added: “Also vital in the strongest league in the world is communication, and who he is partnered with in the heart of the defence.
'As he is so comfortable on the ball, he can also operate in front of the defence - as he has done with Ajax.
'I would not rule out Ten Hag using him in a similar role.”
